How can in-house lawyers navigate ESG challenges to drive sustainable business value?

On Tuesday, 04 June, Wynne Lawrence, a Partner at Clyde & Co, chaired a panel discussion at the Legal 500 ESG event with in-house lawyers Vinicius Diniz Vizzotto (Senior Legal Counsel, AMSL), John Mayes (Legal Director, Randstad UK), Neil Dodds (General Counsel & Company Secretary, Arco), and Matthew Gingell (General Counsel, Oxygen House) exploring the role in-house lawyers should play in driving sustainability[1]

The speakers shared an unmistakable zeal for the key role of in-house counsel in effecting meaningful climate action beyond compliance. Commenting on the current legal landscape, John Mayes acknowledged that in-house legal teams face a “rising drawbridge of compliance and plethora of regulation.” Lawyers know this legal tsunami of technicality all too well, with increasingly substantial and demanding disclosures in place.

However, the speakers emphasised that in-house lawyers cannot rely on regulation alone to drive sustainable business practices. Neil Dodds commented that regulation sharpens the issues at play – it demands transparency —but it is not the reckoning that the climate crisis needs. Disclosure exercises don’t eliminate unsustainable business practices. Instead, reporting requires businesses to be upfront with investors about them. There is a subtle danger that in-house lawyers will become overly focused on reporting, disclosure, and questionnaires, leading to a culture of compliance rather than tackling climate issues. The panel commented that authentic ESG behaviour drives credible reporting, not the other way round. For example, Oxygen House pays suppliers two weeks in advance if they disclose carbon on their invoices, cleverly weaving disclosure into everyday business.

If in-house lawyers want to drive sustainability in business, they must embrace their agency and already highly refined skills to study the business operations they are trusted to advise. Emissions are in their tender packs, purchases, values, and supply chains. An in-house team must cut through the regulatory paperwork and present a commercial solution. There is a legal answer, and it’s powerful. Add clauses to your contracts specifically designed to measure and prevent emissions from the deal's outset—a concept pioneered by legal charity TCLP and their host of supporting lawyers worldwide. The panel emphasised the importance of obligations and terms in purchasing agreements that address supply chain emissions and assert the business’s standards in upstream/downstream activities. For example, a green termination clause allows the business to end a contract if a supplier has a lower carbon footprint.

Listening to the panel, what stands out is that agreeing on terms, defining obligations, and putting pressure on the other side to take on additional demands is standard lawyering. Whilst a General Counsel (GC) is unlikely to singlehandedly save the (working) day by developing a wind-powered laptop, they can directly reduce carbon by leveraging their existing skillset to incorporate clauses which tackle climate—invoking their well-practised negotiation skills, diligence, risk assessment, and, most importantly, delivery. Successfully getting a contract over the line is the bread and butter of in-house practice.

A practised GC is accustomed to delivering unwanted cost-related news, negotiating harsh truths, and navigating a client through change. In this context, the climate crisis is another of the daily challenges lawyers regularly face in their careers, and perhaps the scintillating task of challenge and change in business is the basis for many in-house choosing their careers.

John Mayes stressed the importance of ensuring that ESG is at the heart of your business to benefit employees and foster retention. To bring authentic and truthful change, sustainability in business must extend to your colleagues and employees. This involves evaluating current HR policies, employee branding, and internal working conditions from an ESG perspective. For example, Matthew Gingell neatly highlighted the opportunity for in-house to create wider influence, sharing that Oxygen House offers a paid subscription to Sustainability Unlocked (online sustainability training) to unsuccessful interview candidates.

Many legal professionals resonate deeply with the climate crisis and its humanitarian and ecological consequences. The GC role and trusted in-house positions offer a significant stewardship opportunity conducive to decisive action on climate change. GCs and their in-house legal teams should be confident that they already possess the skills to make a difference.

Thoughtfully drafted contract terms have been unsung heroes in navigating times of uncertainty. From the conversation at the Legal ESG event, it is resoundingly clear that GCs need to take an active, not passive, role in assessing the potential for their business operations to be more sustainable and use their agency to advise. The event concluded with questions from the panel to the audience on whether in-house counsel has a role in engineering decisive climate action, one of which I would like to echo here - "Why not”?

Have contracts effected decarbonisation before? Yes. Read case studies from TCLP here, which showcase businesses that have successfully employed clauses in their contracts to address climate change.

[1] With thanks: This article's ideas draw on the conversation held at the Legal 500 ESG event on Tuesday, 04 June 2024. We are inspired by the panel's thoughts and legal analysis. This article also delves into The Chancery Lane Project's (TCLP) climate work founded by panellist Matthew Gingell. We thank TCLP for their work and advocacy that contracts should be used to tackle climate change, ensuring a more resilient and safer world.